The time is ripe for a U.S.-Taiwan free trade agreement: William Stanton

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(Source: CNA)

(Source: CNA)

TAIPEI (Taiwan News) -- The United States needs to reach a bilateral trade agreement with Taiwan not just because it would be good for Taiwan, but even more so because it is in the best strategic interests of the U.S. in the Asia-Pacific region. And now is the time to do so because, since the signing of the Shanghai Communique in 1972, relations between the United States and Taiwan have never been better, U.S. relations with the PRC have never been worse, and the PRC continues to increase its aggressive efforts to force unification on the Taiwanese people. Now, more than ever, the U.S. should adopt concrete measures to support and strengthen democratic Taiwan.

U.S. Strategic and Political Objectives in FTAs

A common misperception about U.S. Free Trade Agreements (FTAs) is that they are solely or at least principally motivated by trade considerations. It is nonetheless a fact that most U.S. FTAs have been driven far more by strategic and political considerations than just a desire to expand trade or correct trade imbalances. This is evident in the history of U.S. FTAs.

In the last 34 years, the U.S. has negotiated FTAs with only 20 countries, and they are a seemingly odd and disparate group of trade partners. They include both developed and developing countries, both the rich and the poor, and from the U.S. perspective, both those with whom trade is important and those with whom trade is insignificant. The chosen countries are in the Middle East, Latin and North America, and the Asia-Pacific: Israel (1985), Canada and Mexico (NAFTA) (1994), Jordan (2001), Australia (2004), Chile (2004), Singapore (2004), the Central America Free Trade Agreement (Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua) (2004), and the Dominican Republic (2005), Bahrain (2006), Morocco (2006), Oman (2006), Peru (2007), Panama (2012), Colombia (2012), and South Korea (2012).

Of these, as of the end of April 2019, according to U.S. Census Bureau data, only three -- Mexico, Canada, and South Korea -- were among the U.S.’s top 15 partners in total trade of goods and services. (In this most recent data, Taiwan ranked in 10th place.) Notably, all three countries have had consistently large trade surpluses with the U.S., belying arguments that FTAs balance trade.

Singapore, Australia, Chile, Israel, and Peru are also usually among the top 30 U.S. trade partners, but the other 12 of 20 countries with which the U.S. has FTAs are relatively insignificant as trading partners. What then is the motivation for the U.S. selection of countries for FTAs? The answer is that strategic and political considerations have always outweighed U.S. economic interests in selecting and pursuing partners for FTAs.

The U.S.-Israel and U.S.-Jordan FTAs Showed the Way

The primary example of this is Israel, with which we reached our first FTA. As trade expert Howard Rosen argued back in 2004 in an analysis of “Free Trade Agreements as Foreign Policy Tools” (in Free Trade Agreements: US Strategies and Priorities, ed. Jeffrey J. Schott, Peterson Institute for International Economics), both the Israeli and Jordanian FTAs were “clear examples of the use of trade policy -- specifically bilateral free trade agreements -- as a means of pursuing foreign policy objectives” because these interests were more significant than any economic interests.

Rosen cited among U.S. objectives with Israel the U.S. desire “to demonstrate strong bilateral relations…beyond already existing military/security and U.S. foreign assistance.” In the same vein, Rosen argued that U.S. motives for an FTA with Jordan included a desire to “reward King Hussein for his cooperation in the Oslo peace process” and for “his mediating role between Israel and the Palestinians during negotiations at Camp David,” as well as a need to keep Jordan in the peace process.

Three other moderate Arab states -- Morocco, Oman and Bahrain – also won U.S. favor. Bahrain, moreover, is the home of the U.S. Naval Forces Central Command and U.S. Fifth Fleet. Panama is, of course, the home of the vital Panama Canal, and Singapore a security partner positioned on the strategically critical Strait of Malacca.

In the case of Central American states, recent U.S. problems dealing with emigrants from these troubled countries are a reminder of the U.S. desire to stabilize, democratize, and improve the economies of these countries in an effort to reduce emigration and drug trafficking and promote political and economic reforms. In the cases of Chile, Peru, and Colombia, the United States wanted to encourage their continuing progress toward market economies and greater democracy.

Political and strategic objectives are evident in all U.S. FTAs. I was the Deputy Chief of Mission in the U.S. Embassy in Australia when the U.S. negotiated an FTA. This was, in effect, the reward requested by then-Prime Minister John Howard for his decision to send Australian troops to join the “alliance of the willing” in Iraq.

Similarly, I was Deputy Chief of Mission in U.S. Embassy Seoul when we began negotiating an FTA with South Korea, which was what then-President Lee Myung-bak wanted in connection with his politically difficult decision to allow limited imports of U.S. beef. South Korea, moreover, is a treaty ally of the U.S., and Lee was far more supportive of the alliance than his predecessor Roh Moo-hyun.

Political and strategic considerations of course also played a key role in the NAFTA agreement with Canada and Mexico, two of U.S’s top three trading partners in the world and the only countries bordering the United States.

AmCham Taipei Calls for Taiwan to Do More

In light of this history, the idea that an FTA with Taiwan is now blocked over issues like the export of U.S. pork to Taiwan does not make much sense except to those Taiwanese and American politicians (and the negotiators who represent them) whose constituents either want this or other specific issues included or excluded in a deal. The American Chamber of Commerce Taipei in its excellent 2019 Taiwan White Paper therefore stresses the need for Taiwan to adopt “bold measures…to achieve a breakthrough in Taiwan’s relationship with the global trading community.” In particular, AmCham urges that the Taiwan Government:

“…make an all-out effort to demonstrate to the U.S. that Taiwan would be a highly appropriate candidate for a bilateral trade agreement. As a first step, [Taiwan should] remove any existing irritants in the U.S.-Taiwan trade relationship. Demonstrate Taiwan’s deep commitment to international standards, respect for sound scientific evidence, and dedication to a fair and open international trading system. Resolving major outstanding economic issues with the U.S. would necessarily involve some sacrifice, but the rewards could be immeasurable, both economically and strategically. It would strengthen Taiwan’s ties to the U.S., help diversify Taiwan’s commerce to avoid over-reliance on any one area, and encourage more countries and trade groups to enter into similar agreements with Taiwan.”

But the Time Has Come for the U.S. to Take Action

AmCham Taipei’s thoughtful advice is logical, but after ten years of dealing both directly and indirectly with efforts to achieve a U.S.-Taiwan trade agreement, I believe it is time for Washington in its own self-interest to take action. We should treat Taiwan as we treat Israel, as an advanced democracy of enormous geostrategic importance facing a continuing threat to its very existence, requiring the continuing support and assistance of the U.S. To this end, Washington should at a minimum initiate negotiations to reach a trade agreement.

The 10th largest trading partner of the United States, Taiwan is a key model in Asia of democracy, freedom, and respect for human rights and the rule of law. Taiwan is also a key link in the high-tech global supply chain and one of world’s leaders in technological innovation. It is located at the center of the Pacific Rim in East Asia. The loss of Taiwan’s de facto sovereignty, whether because of its economic dependence on the PRC or PRC military aggression, would undermine the entire U.S. alliance system in Asia and other Asian military partnerships that have maintained the peace, stability, and increasing prosperity that Asian countries, including China, have come to take for granted.

Fortunately, there is growing U.S. support in Congress for a bilateral trade agreement with Taiwan. In a March 28 VOA interview, Edwin Feulner -- the founder and former president of the Heritage Foundation think tank -- predicted "huge bipartisan support on Capitol Hill" for such an agreement. "Both Republican and Democrat, both House and Senate members, are overwhelmingly positive that a free China can exist, and can be there in the world community today," he said.

Two prominent members of the U.S. Congress, joining Feulner on March 27 in a Skyped conference in Hawaii welcoming President Tsai Ing-Wen to the U.S., expressed their strong support for a bilateral FTA. Sen. Cory Gardner of Colorado called the pursuit of a trade agreement with Taiwan "imperative." Rep. Ted Yoho of Florida told President Tsai and the audience that "trade is important between our nations, but more important than that is our common belief in the values we hold, the democracies that we have together.”

President Tsai herself expressed enthusiasm over the prospect of bilateral trade talks with the U.S., stating “if we can have a breakthrough in trade with the U.S., this will be very helpful in terms of encouraging many other trading partners to do the same."

President Tsai added that a trade deal with the U.S. would reduce Taipei's reliance on China “as they increase their political influence in Taiwan, primarily using economic actors." More recently, on June 10 in Washington, Taiwan’s chief trade negotiator John Deng (鄧振中), expressed optimism about the possibility of a trade agreement with the United States, noting that Taiwan will “always be ready” to reach a trade agreement with the U.S.

Taiwan is in the best position to judge the timing of bilateral trade negotiations and possible reactions from Beijing. But it is long past time for Washington to offer negotiations to this critical strategic partner. Washington would not be doing Taiwan a favor. A bilateral trade agreement clearly serves U.S. interests as well as the interests of Taiwan.

William A. Stanton has served since 2017 at National Taiwan University (NTU) as a Professor at the Center for General Education and subsequently also as the Chief Advisor to NTU's International College Provisional Office. Dr. Stanton previously worked for four years as the founding Director of the Center for Asia Policy at National Tsing Hua University (NTHU). From October 2014 through January 2016, he was also NTHU's Senior Vice President for Global Affairs. Dr. Stanton previously served for 34 years as a U.S. diplomat. His final posting was as Director of the American Institute in Taiwan (2009-2012).